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01.06.2023 12:37 PM
Correction Continues: Bitcoin Breaks $27k

Bitcoin broke out of its consolidation phase and made several impulsive price movements this week. The cryptocurrency reached a local high at the $28k mark amid news of an agreement to increase the U.S. debt ceiling. However, the asset was unable to sustain itself at this level for long due to growing selling pressure.

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As a result, the price of BTC slowly started to decline amidst increasing bearish sentiment and low trading volumes. As of June 1, Bitcoin completely erased its upward surge that allowed it to reach the $28k level. This means that the asset is resuming its corrective movement.

Fundamental Factors

The fifth month of the year proved the saying "sell in May and go away" true, as Bitcoin lost 7.1% of its market capitalization. Despite BTC's ongoing decline, the fundamental backdrop has stabilized. The House of Representatives managed to vote in favor of increasing the debt ceiling, with voting in the Senate and President Joe Biden's signature remaining.

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At the same time, it has become known that markets are pricing in the likelihood of another key interest rate hike in 2023. It is quite possible that this will happen in June or July, according to BBG. Meanwhile, investors are confident that the Fed will lower the indicator in 2023, hence the long-term expectations are positive.

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Today, cryptocurrency trading is allowed in Hong Kong, which may positively affect BTC/USD quotes. The analytical publication Artemis reports that Bitcoin's blockchain leads in terms of the growth dynamics of active addresses. Taking these factors into account, it can be argued that the overall fundamental backdrop is positive.

BTC/USD Analysis

However, Bitcoin continues to decline, and in the last 24 hours, the asset has lost 1.5% of its market capitalization, reaching the $26.8k level. At the same time, there is a local increase in daily trading volumes up to $15 billion, but the overall situation remains unchanged. BTC failed to hold above $28.2k, and the asset is resuming its corrective movement.

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As of 08:00 UTC, Bitcoin is trading near a local support level, and its breakthrough may trigger an increase in bearish volumes. This will be influenced by the buffer zone down to the $26k level, where the first significant support line for bulls is located. The second target for sellers will be the range of $24.6k–$25k, where the base of the upward trend is located.

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On the daily chart, we can see that two days later, bears managed to engulf the bullish candle of May 28. There is also a local increase in bearish volumes, indicating the sustainability of the downward movement. Technical metrics indicate a continuation of the price decline: RSI and Stochastic have broken the 50 mark and continue to decline.

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At the moment, there is no reason to claim a price reversal. However, it is worth closely monitoring the price reaction to the retest of the $25.5k–$26k zone, where a significant support zone is located, and a potential impulsive rebound is quite possible. In any case, it is not advisable to seriously consider a bullish price scenario unless BTC manages to hold above $28k.

Conclusion

Bitcoin is resuming its corrective movement with primary targets in the range of $24.6k–$25k. To achieve this, sellers need to successfully pass the levels of $26k and $25.5k, and as of June 1, there is potential for that. At the same time, the upcoming Federal Reserve meeting and the pause in rate hikes in June could give the bulls a recovery impulse, but until then, the asset will move within a downward trend.

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